FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended Commission file number 1-4797
ILLINOIS TOOL WORKS INC.
(Exact name of registrant as specified in its charter)
Delaware 36-1258310
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3600 West Lake Avenue, Glenview, IL 60025-5811
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (708) 724-7500
Former address:
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X . No .
The number of shares of registrant's common stock, without par value,
outstanding at July 31, 1994: 113,281,621.
Part I - Financial Information
Item 1
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
FINANCIAL STATEMENTS
The unaudited financial statements included herein have been prepared
by Illinois Tool Works Inc. and Subsidiaries (the "Company"). In the
opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair
statement of the results for interim periods. It is suggested that
these financial statements be read in conjunction with the financial
statements and comments on financial statements included in the
Company's annual report on Form 10-K.
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF INCOME
(UNAUDITED)
(In Thousands Except for
Per Share Amounts)
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
Operating Revenues $881,042 $829,318 $1,652,481 $1,579,340
Operating costs 583,910 556,998 1,104,174 1,065,885
Selling, administrative,
and research and develop-
ment expenses 160,526 164,923 314,892 323,238
Amortization of goodwill
and other intangible
assets 5,493 5,462 10,986 10,697
------- ------- ------- -------
Operating Income 131,113 101,935 222,429 179,520
Interest expense (7,114) (10,014) (14,650) (18,058)
Amortization of retiree
health care (1,742) (1,742) (3,484) (3,484)
Other expense (7,303) (1,880) (6,553) (1,852)
------- ------- ------- -------
Income Before Income Taxes 114,954 88,299 197,742 156,126
Income taxes 44,227 33,500 76,100 59,300
------- ------- ------- -------
Net Income $ 70,727 $ 54,799 $ 121,642 $ 96,826
======= ======= ======= =======
Per share of common stock:
Net Income $ .62 $ .49(A) $1.07 $0.86(A)
===== ===== ===== =====
Cash dividends:
Paid $ .13 $ .12(A) $ .26 $ .24(A)
===== ===== ===== =====
Declared $ .13 $ .12(A) $ .26 $ .24(A)
===== ===== ===== =====
Average number of shares of
common stock outstanding
during the period 113,254 112,976(A) 113,225 112,896(A)
======= ======= ======= =======
(A) Restated for two-for-one stock split in June 1993.
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
(In Thousands)
ASSETS June 30, 1994 December 31, 1993
Current Assets:
Cash and equivalents $ 45,349 $ 35,395
Trade receivables 625,434 544,226
Inventories 430,675 403,902
Deferred income taxes 58,451 57,764
Prepaid expenses and other
current assets 53,825 52,361
--------- ---------
Total current assets 1,213,734 1,093,648
--------- ---------
Plant and Equipment:
Land 63,818 65,134
Buildings 290,381 282,104
Machinery and equipment 811,845 771,066
Equipment leased to others 65,762 62,857
Construction in progress 32,810 24,718
--------- ---------
1,264,616 1,205,879
Accumulated depreciation (680,075) (622,114)
--------- ---------
Net plant and equipment 584,541 583,765
--------- ---------
Investment in Leveraged Leases 56,525 60,088
Goodwill 363,029 363,769
Other Assets 226,016 235,621
--------- ---------
$2,443,845 $2,336,891
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 90,186 $ 107,073
Accounts payable 155,178 149,205
Accrued expenses 290,319 233,932
Cash dividends payable 14,724 14,710
Income taxes payable 39,686 41,222
--------- ---------
Total current liabilities 590,093 546,142
--------- ---------
Non-current Liabilities:
Long-term debt 325,259 375,641
Deferred income taxes 93,373 92,470
Other 67,681 63,969
--------- ---------
Total non-current liabilities 486,313 532,080
--------- ---------
Stockholders' Equity:
Preferred stock -- --
Common stock 172,562 170,185
Income reinvested in the business 1,221,623 1,129,435
Common stock held in treasury (1,952) (1,955)
Equity adjustment from foreign
currency translation (24,794) (38,996)
--------- ---------
Total stockholders' equity 1,367,439 1,258,669
--------- ---------
$2,443,845 $2,336,891
========= =========
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF CASH FLOWS
(UNAUDITED)
(In Thousands) Six Months Ended
June 30
1994 1993
Cash Provided by (Used for) Operating Activities:
Net Income $121,642 $ 96,826
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 70,223 65,838
Change in deferred income taxes 546 (2,953)
(Gain) loss on sale of plant and equipment,
and investment properties (1,472) 1,080
Gain on sale of operations & affiliates (4,241) --
Other non-cash items, net 5,672 41
------- -------
Cash provided by operating activities 192,370 160,832
Changes in assets and liabilities:
(Increase) decrease in--
Trade receivables (75,828) (53,887)
Inventories (18,951) 3,752
Prepaid expenses and other assets 6,071 (3,873)
Increase (decrease) in--
Accounts payable 1,546 (12,385)
Accrued expenses 49,189 19,976
Income taxes payable (2,564) (15,572)
Other, net 5,413 1,054
------- -------
Net cash provided by operating activities 157,246 99,897
------- -------
Cash Provided by (Used for) Investing Activities:
Acquisition of subsidiaries (excluding cash and
equivalents) and additional interest in affiliates (12,514) (262,503)
Additions to plant and equipment (61,326) (57,013)
Proceeds from sale of plant and equipment, and
investment properties 12,458 2,830
Proceeds from sale of operations & affiliates 12,037 --
Other, net 3,524 (931)
------- -------
Net cash used for investing activities (45,821) (317,617)
------- -------
Cash Provided by (Used for) Financing Activities:
Cash dividends paid (29,439) (26,980)
Issuance of common stock 2,380 3,556
Net proceeds (repayments) of short-term debt (68,391) 146,018
Proceeds from long-term debt 1,755 125,477
Repayments of long-term debt (2,672) (10,269)
------- -------
Net cash provided by (used for) financing
activities (96,367) 237,802
------- -------
Effect of Exchange Rate Changes on Cash and Equivalents (5,104) 1,022
------- -------
Cash and Equivalents:
Increase during the period 9,954 21,104
Beginning of the period 35,395 31,193
------- -------
End of the period $ 45,349 $ 52,297
======= =======
Cash Paid During the Period for Interest $ 14,643 $ 20,556
======= =======
Cash Paid During the Period for Income Taxes $ 80,946 $ 71,129
======= =======
Liabilities Assumed from Acquisitions $ 2,619 $ 89,891
======= =======
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
COMMENTS ON FINANCIAL STATEMENTS
(UNAUDITED)
(1) INVENTORIES at June 30, 1994 and December 31, 1993 were as follows:
(In Thousands)
June 30, Dec. 31,
1994 1993
Raw Material $108,585 $ 94,105
Work-in-process 65,557 61,314
Finished goods 256,533 248,483
------- -------
$430,675 $403,902
======= =======
(2) OTHER INCOME (EXPENSE), consists of the following:
(In Thousands)
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
Interest Income $ 1,091 $ 2,312 $ 1,967 $ 4,392
Income from unconsolidated
affiliates 596 349 951 834
Net reserves for disposition
and relocation of certain
facilities, restructuring costs,
revaluation of non-operating
assets to realizable value, and
nonrecurring costs unrelated to
operations (11,669) (4,138) (13,696) (4,525)
Loss on sale of investment
properties (232) -- (398) --
Gain on sale of operations
and affiliates 3,794 -- 4,241 --
Gain (loss) on sale of plant and
equipment (98) (346) 1,870 (1,080)
Other, net (785) (57) (1,488) (1,473)
------ ------ ------ ------
$(7,303) $(1,880) $(6,553) $(1,852)
====== ====== ====== ======
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
COMMENTS ON FINANCIAL STATEMENTS
(UNAUDITED)
(3) LONG-TERM DEBT at June 30, 1994 and December 31, 1993 consisted of the
following:
(In Thousands)
June 30, Dec. 31,
1994 1993
Commercial paper $ 50,000 $100,000
7-1/2% notes due December 1, 1998 125,000 125,000
5-7/8% notes due March 1, 2000 125,000 125,000
Other, including capitalized lease obligations 27,669 28,260
------- -------
327,669 378,260
Current maturities (2,410) (2,619)
------- -------
$325,259 $375,641
======= =======
In the second quarter of 1994, $50,000,000 of the long-term commercial paper
balance was reclassified to short-term debt, due to earlier repayment than
was previously expected.
Item 2 - Management's Discussion and Analysis
ENGINEERED COMPONENTS SEGMENT
Businesses in this segment manufacture short lead-time plastic and metal
components and assemblies; industrial fluids and adhesives; plastic and metal
fasteners; and fastening tools and equipment. This segment primarily serves
the construction, automotive and general industrial markets.
(Dollars in millions)
Three months ended Six months ended
June 30 June 30
Operating
Revenues 1994 1993 1994 1993
Domestic $313 $282 $595 $558
International 157 156 286 283
------- ------- ------- -------
Total $470 $438 $881 $841
======= ======= ======= =======
Three months ended June 30 Six months ended June 30
Operating 1994 1993 1994 1993
Income Income Margin % Income Margin % Income Margin % Income Margin %
Domestic $ 53 17.0% $ 38 13.5% $ 93 15.7% $ 73 13.0%
International 20 12.4% 16 9.8% 31 10.8% 24 8.4%
---- ---- ---- ----
Total $ 73 15.4% $ 54 12.2% $124 14.1% $ 97 11.5%
==== ==== ==== ====
For both the three month and six month periods ended June 30, 1994, continued
volume growth in the construction businesses and increased penetration in a
strong automotive market led to increased domestic revenues compared with last
year. Operating income and margins were higher for both the second quarter and
year-to-date 1994 as a result of this volume growth. Lower operating costs and
selling, administrative and research and development expenses also contributed
to improved margins in both periods of 1994.
Internationally, revenues increased slightly for both the three month and six
month periods ended June 30, 1994, primarily due to increased penetration in
the European automotive markets. Operating income and margins grew for both
the second quarter and year-to-date 1994, due to a decline in costs in the
construction businesses as well as improved productivity and volume gains from
the European automotive businesses.
INDUSTRIAL SYSTEMS AND CONSUMABLES SEGMENT
Businesses in this segment manufacture longer lead-time systems and related
consumables for consumer and industrial packaging, finishing, furniture,
inspection and quality assurance applications. The largest markets served by
this segment are general industrial, food and beverage, construction and
industrial capital goods.
(Dollars in millions)
Three months ended Six months ended
June 30 June 30
Operating
Revenues 1994 1993 1994 1993
Domestic $261 $238 $490 $454
International 150 153 281 284
------- ------- ------- -------
Total $411 $391 $771 $738
======= ======= ======= =======
Three months ended June 30 Six months ended June 30
Operating 1994 1993 1994 1993
Income Income Margin % Income Margin % Income Margin % Income Margin %
Domestic $ 44 17.2% $ 36 15.2% $ 76 15.6% $ 62 13.6%
International 14 9.1% 12 7.9% 22 7.7% 21 7.4%
---- ---- ---- ----
Total $ 58 14.2% $ 48 12.4% $ 98 12.7% $ 83 11.3%
==== ==== ==== ====
For both the three month and six month periods ended June 30, 1994, domestic
revenues increased compared with 1993, primarily due to the industrial
packaging group along with the finishing systems and consumer packaging
businesses. Operating income and margins improved in both periods of 1994
because of a reduction in expenses and new product introductions in the
industrial and consumer packaging groups and continued margin improvement in
the finishing systems businesses.
Soft Japanese markets, served by industrial packaging and finishing systems
businesses, resulted in a slight decline in international revenues in the
second quarter of 1994 versus 1993. Year-to-date international revenues
decreased slightly in 1994 versus 1993 primarily due to the soft Japanese
markets and declines in the German consumer packaging businesses, partially
offset by revenue gains in the European industrial packaging markets.
Operating income and margins were higher in the second quarter of 1994
compared with 1993 due to cost reductions and new product introductions in
the finishing systems businesses. For the six months ended June 30, the
improvement in income and margins in 1994 from the finishing systems
businesses was partially offset by reduced income from the European
industrial packaging businesses as a result of price pressure.
OPERATING EXPENSES
Operating costs as a percentage of revenues decreased to 66.8% in the first
half of 1994 versus 67.5% in the first half of 1993. Selling, administrative,
and research and development expenses were 19.1% of revenues in the first
half of 1994 versus 20.5% in the first half of 1993. These ratios were lower
because of cost reductions as a result of a Company-wide objective to reduce
costs.
INTEREST EXPENSE
Interest expense declined to $14.7 million in the first half of 1994 from
$18.1 million in the second quarter of 1993, primarily due to a reduction in
commercial paper borrowings and foreign borrowings, and lower foreign
interest rates.
OTHER EXPENSE
Other expense increased to $7.3 million in the second quarter of 1994 from
$1.9 million in the second quarter of 1993. This increase is mainly due to
nonrecurring costs unrelated to operations and lower interest income,
partially offset by a gain on the sale of operations and affiliates.
NET INCOME
Net income of $70.7 million ($0.62 per share) in the second quarter of 1994
was 29.1% higher than the 1993 second quarter net income of $54.8 million
($0.49 per share). Net income of $121.6 million ($1.07 per share) for the
first half of 1994 exceeded 1993 first half net income of $96.8 ($0.86 per
share). The Company effected a two-for-one stock split in June 1993 that
doubled the outstanding shares. Net income per share for 1993 has been
restated for the stock split. For both the second quarter and first half of
1994, foreign currency had no material impact on earnings versus 1993.
FINANCIAL POSITION
Net working capital at June 30, 1994 and December 31, 1993 is summarized as
follows:
(In Thousands)
June 30, Dec. 31, Increase/
1994 1993 (Decrease)
Current Assets:
Cash and equivalents $ 45,349 $ 35,395 $ 9,954
Trade receivables 625,434 544,226 81,208
Inventories 430,675 403,902 26,773
Other 112,276 110,125 2,151
---------- ---------- ----------
$1,213,734 $1,093,648 $ 120,086
---------- ---------- ----------
Current Liabilities:
Short-term debt $ 90,186 $ 107,073 $ (16,887)
Accounts payable and
accrued expenses 445,497 383,137 62,360
Other 54,410 55,932 (1,522)
---------- ---------- ----------
$ 590,093 $ 546,142 $ 43,951
---------- ---------- ----------
Net Working Capital $ 623,641 $ 547,506 $ 76,135
========== ========== ==========
Current Ratio 2.06 2.00
========== ==========
Trade receivables increased primarily due to seasonally stronger domestic
revenues in the second quarter of 1994 versus the fourth quarter of 1993.
Overall growth of the business combined with a seasonal buildup contributed
to the increase in inventories from year-end 1993 to second quarter 1994.
Accounts payable and accrued expenses increased at June 30, 1994, versus
December 31, 1993, due mainly to seasonal growth and an increase in accrued
retiree health care.
In the second quarter of 1994, $50,000,000 of the long-term commercial paper
balance was reclassified to short-term debt, due to earlier repayment than
was previously expected.
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May 6, 1994. The
following members were elected to the Company's Board of Directors to hold
office for the ensuing year:
Nominees In Favor Withheld Non-votes
J. W. Becton, Jr. 89,027,931 356,720
S. S. Cathcart 89,037,733 346,918
S. Crown 89,011,822 372,829
R. M. Jones 89,035,955 348,696
G. D. Kennedy 89,028,490 356,161
R. H. Leet 89,037,803 346,848
R. C. McCormack 89,038,186 346,465
J. D. Nichols 89,034,618 350,033
P. B. Rooney 89,036,035 348,616
H. B. Smith 89,033,313 351,308 30
O. J. Wade 89,034,035 350,416 200
Item 6 - Exhibits and Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ILLINOIS TOOL WORKS INC.
Dated: August 12, 1994 By: /s/ Michael W. Gregg
Michael W. Gregg, Senior Vice President
and Controller (Principal Accounting
Officer)
Dated: August 12, 1994 By: /s/ Stewart S. Hudnut
Stewart S. Hudnut, Senior Vice President
and Secretary